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Mix-Ansicht- Fibonacci zum Trading zu gebrauchen? - nasdaq, 28.08.2002, 20:33
Fibonacci zum Trading zu gebrauchen?
-->Is it Fibonacci or Just Coincidence?
8/28/02 12:37 PM ET
The rhythm of life is intricate but orderly, tenacious but fragile. To keep that in mind is to build the key to survival.
--Shirley Hufstedler
I mentioned Fibonacci earlier and thought I would expand on it a bit. The idea behind Fibonacci numbers is that a certain flow exists in nature that consistently produces certain mathematical pattern. The pattern is seen in such things as waves, honeybees, petals on flowers, human anatomy and so on. The pattern is 0,1,1,2,3,5,8,13,21, etc. where each succeeding number is the sum of the two immediately proceeding.
This has been converted into the percentage equivalents of 23.6%, 38.2%, 61.8%, 100%, 161.8%, 261.8%, and 423.6%.
The theory is that stocks have a tendency to find support after they have pulled back a percentage equal to one of the Fibonacci magic numbers.
For example the DJIA has gone from a low of 7532 on July 24 to a high of 9077 on August 22. That is a move of 1545 points. Then apply the Fibonacci percentages to 1545 to come up with likely areas of support. 38.2% of 1545 is 590 points. A 590 point pullback from the high of 9077 would take us to 8487.
That is the theory and how it is applied. Does it work? I have no idea. I think it is interesting and I like to look at it but I think too often people confuse it with coincidence. If you allow a 10% margin of error on either side of the Fibonacci numbers you have covered a pretty good area and are going to hit within that range pretty often just randomly.
I do think that Fibonacci percentages help provide some general perspective about the reasonablness of pullbacks but I avoid trying to be overly precise about applying them. A pullback in the DJIA of 38.2% to 8487 does indeed seem fairly reasonable. As I mentioned earlier there is some support right around 8500.
We have been heading straight down all day and things are getting a little extreme. I would not be surprised to see a little bounce to relieve some of the pressure but I don't think it will hold very well. We are heading into the end of the month and it has been the best month by far or many so there may be a greater inclination than usual to mark up shares to preserve that profit.
I'm staying with my short bias for now but am starting to lighten up a bit on some of my index plays.
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